By Ted Chapekis
The Accounting Office

 

How confident are you in understanding your cash flow? Are you comfortable with the term? Many business owners are not. This is surprising, given that all businesses essentially run on cash, and cash flow is the lifeblood of one’s business.

 

Some business experts even say that a healthy cash flow is more important than your business’s ability to deliver its goods and services! Although hard to believe, consider this: if you fail to satisfy a customer and lose that customer’s business, you can always work harder to please the next customer. If you fail to have enough cash to pay your suppliers, creditors, or employees, you’re out of business!

 

It seems much of the accounting industry and their small business clients are only interested in completing tax returns and filling out forms. Smart businesses don’t settle for number crunchers. They seek a firm that will provide regular bookkeeping and financial statements, preferably every month. Ask for more than a Balance Sheet and Income Statement. Cash Flow Statements are vital to your business.

 

Many believe delivering these tasks are prohibitively expensive or will make their lives more difficult. In fact, many firms are able to deliver these services very affordably and the goal should be to save the client time and confusion by arming them with tools and information to, more effectively, run their business.

 

What Is Cash Flow?

In simple terms, cash flow is the movement of money in and out of your business. These movements are called inflow and outflow. Inflows for your business primarily come from the sale of goods or services to your customers. The inflow only occurs when you make a cash sale or collect on receivables, however. Remember, it is the cash that counts! Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.

 

Outflows for your business are generally the result of paying expenses. Examples of cash outflows include paying employee wages, purchasing inventory or raw materials, purchasing fixed assets, operating costs, paying back loans, and paying taxes.

 

Cash Flow Versus Profit

Profit and cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period, say a fiscal quarter or one month. Profit is what is used for calculating and reporting the business’s taxes.

 

Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business. It is concerned with the movement of money in and out of a business. More importantly, it is concerned with the times at which the movement of the money takes place.

 

Theoretically, even profitable companies can go bankrupt. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business.

 

Remember, a sale is booked when the sale is made – not when the cash from the sale is actually received. Days, weeks, even months may transpire before the cash catches up with the sale. In the meantime bills are being paid. As a result, these events may cause other missed profit opportunities or force a business to seek funding, thus creating debt. Should this happen often enough or occur in large numbers, bankruptcy could follow.

 

Analyzing Your Cash Flow

The sooner you learn how to manage your cash flow, the better your chances for survival. Furthermore, you will be able to protect your company’s short-term reputation as well as position it for long-term success.

 

The first step toward taking control of your company’s cash flow is to analyze the components that affect the timing of your cash inflows and outflows. A thorough analysis of these components will reveal problem areas that lead to cash flow gaps in your business. Accurate financial statements, including a cash flow statement, is imperative in analyzing these crucial components. Narrowing these cash flow gaps are the key to cash flow management.

 

Some of the more important components to examine are:

• Accounts receivable. Accounts receivable represent sales that have not yet been collected in the form of cash. An accounts receivable is created when you sell something to a customer in return for his or her promise to pay at a later date. The longer it takes for your customers to pay on their accounts, the more negative the effect on your cash flow.
• Inventory. Inventory describes the extra merchandise or supplies your business keeps on hand to meet the demands of customers. An excessive amount of inventory hurts your cash flow by using up money that could be used for other cash outflows. Too many business owners buy inventory based on hopes and dreams instead of what they can realistically sell. Keep your inventory as low as possible.
• Accounts payable and cash flow. Accounts payable are amounts you owe to your suppliers that are payable some time in the near future – “near” meaning 30 to 90 days. Without payables and trade credit, you’d have to pay for all goods and services at the time you purchase them. For optimum cash flow management, examine your payables schedule.
• Credit terms. Credit terms are the time limits you set for your customers’ promise to pay for their purchases. Your creditors also set credit terms for your payables.  Credit terms affect the timing of your cash inflows and outflows. A simple way to improve cash flow is to get customers to pay their bills more quickly and use the terms of vendors and suppliers to the extent possible.
• Credit policy. A credit policy is the blueprint you use when deciding to extend credit to a customer. The correct credit policy – neither too strict nor too generous for your industry – is crucial for a healthy cash flow.

 

Of course it makes sense to take advantage of opportunities like quantity or other discounts. Some businesses require additional expenditures to expand their business. As a result, some cash flow gaps are created intentionally.  Unavoidable cash flow gaps include seasonal businesses which may require stop gaps like lines of credit or loans.

 

Monitoring and managing your cash flow is important for the vitality of your business. The first signs of financial woe appear in your cash flow statement, giving you time to recognize a forthcoming problem and plan a strategy to deal with it. Furthermore, with periodic cash flow analysis, you can head off those unpleasant financial glitches by recognizing which aspects of your business have the potential to cause cash flow gaps.

 

2012 appears to be much improved over previous years. Now is the time to take advantage of growing markets. Be sure to be properly prepared!

 

The Accounting Office, Inc. has served small and medium sized businesses since 1993. Learn more by visiting http://www.accountingofficeinc.com or emailing info@accountingofficeinc.com.

Ginny Victory
CPA and a Certified Coach

 

Traditional corporate strategic planning models can be rigid and hard to apply to the life of the entrepreneur. When your business and your life are intimately entwined, having a strategic plan that includes goals in both realms is vital to achieving the kind of life that makes you thrilled to leap out of bed every morning.

 

Here’s a unique three step process that my entrepreneur clients use. Instead of dry numbers and boring powerpoints, this process connects planning deeply to the entrepreneur’s passion, which provides fuel for the day-to-day journey.

 

Step 1 – Take Inventory

Before you begin your strategic planning process for 2012, start by laying a strong foundation. Track all of your progress year to date – anything and everything. And do it in a way that resonates with who you are and how you prefer to communicate – write it, draw a picture, create a Success Board, go wild!

 

Here are the rules: no critiquing, no explaining, no justifying, no confessing. Just pure recognition and celebration of every last thing that’s moved you even a millimeter forward. (Even if it’s that mistake you learned from or got “blessed” by.) Sometimes leaders get stuck here – a tip for successful tracking is to start with gratitude. For what are you grateful? Keep going until you have at least 100 things.

 

What else?

 

Be sure to count all the ‘ah-ha’ discoveries, the revelations, the breakthroughs. These are important – they represent movement, momentum and learning, all imperative for the entrepreneur.

 

Next, track the tangibles.

 

What are your revenues? Your profit? By what percent did the numbers you’re tracking increase? Or decrease? How many people did you impact? What are their results? What other numbers are relevant to your business?

 

….and quantify the intangibles. (This is an element that’s missing from most traditional strategic planning models.)

 

Did you create more enjoyment and energy for yourself in your business because you finally hired that bookkeeper? What did it free your time to focus on? How did that impact your being of service and generating revenue?

 

Create metrics to quantify the value of your renewed attitude, increase in space, clarity of mind, etc.

 

Don’t forget to add all of the personal achievements as well…go through the above again, this time for your personal for life.

 

And then, celebrate!

 

Dance, call friends, post it on Facebook….

 

Step 2 – Begin with the End in Mind

Now you’re ready to start planning your 2012. But before you can create a plan, you’ve first got to determine your long term vision. Go ahead, close your eyes. Imagine that it’s December 31, 2014.

 

Yep – go three years out. Start with the facts. How old will you be? What grade will your kids be in? What’s true about your significant other?

 

Next, open your mind. Let your intuition speak to you. In your ideal life, where will you be living? What will life be like?

 

Move through your day, starting from the moment you wake up. What’s the first thing you see, hear, sense? The next?

 

What’s going on in your business? What are the numbers – your revenue, profit? Who’s on your team? What are you doing? Who do you work with? What’s the impact? What are you known for?

 

What is the most important thing to you? Why? What does it feel like?

 

The bottom line with this exercise is to get a clear picture of what you want. And then to capture it – this is your vision. Make it as specific, detailed and emotion-filled as you possibly can.

 

Record your vision in whatever format is meaningful for you:  writing, song, poem, vision board, video, graphic design, etc. Really use your creativity and imagination. Capturing your vision in a way that speaks uniquely to you will keep you inspired and focused to make it happen.

 

Imagining your ideal life three years into the future will help you balance immediate demands with your long-term desires, so that you can make decisions that meet your needs and take you where you want to go.

 

Step 3 – 90 Day Goals that Rock

In step 2, you created a compelling three year vision for your life. Now that you know what you want for 2014, it’s time to lay out what you need to do in the next three months to get there.

 

Turn on some music, drive out to the lake, gather a few friends/colleagues, or whatever gives you joy and have some fun with these strategic planning steps!

 

Here are a few guidelines to create effective goals. Set 90 day goals that are:

• a balance of short term needs and 2014-focused
• a mix of business and personal objectives
• specific and measurable
• completely unique to you (unconventional, quirky, weird, basic, fun)
• realistic
• on the calendar
• actionable

 

Balance short term needs with 2014 vision.

 

Go ahead, make a list of anything and everything that you want to achieve in the next three months that will move you toward your 2014 vision.

 

But then go further – what is urgent or important today, this month, this year? Add those, too.

 

You may find there is tension between the two. That’s good – holding tension and getting comfortable with it is one key to success. Addressing immediate needs while taking action toward long-term goals means that you’ll find peace today and freedom tomorrow.

 

Include personal objectives in the mix.

 

Be sure to include your personal aims as well. You don’t operate a business in a vacuum, so add your life goals to the list. By including goals from all your areas of focus, you’ll reap the rewards of leverage and integration. Are you familiar with the concept of compound interest? It’s when interest is added to the principal amount, so that the interest that has been added then also earns interest. It’s a powerful way to build a nest egg.

 

Well, the principle works for goal achievement, too. When you can integrate your goals from your business and your personal life, you’ll compound the progress, by accelerating your results!

 

Be as specific and measureable as possible.

 

When you’re determining your goals, include numbers wherever you can. Numbers are a benchmark and guide. They tell your story and mirror to you where you are on the journey to achieving your vision. Quantify everything you can; be as specific and measurable as possible.

 

You can even make desirable states, like positive emotions (gratitude, peace, love) quantifiable. Here’s how: on a scale from 1 to 10, note where you are now on the scale and where you want to be in 3 months. (You’ll need to define for yourself what each demarcation on the scale means.) With this method, you CAN measure the intangible, and track the spiritual.

 

Choose the goals that make you smile (or smirk!)

 

Now go back and take a look…do the goals resonate with you? Are you inspired? Will you be having fun as you implement? Some goals or “to-do” items show up on our list because it’s what we’ve been told we “should” do or what an expert advised or what a “good girl” or “smart entrepreneur”, etc. does. Select from your pool of resources the ones that fit you. Be bold, be brave! Eliminate the “shoulds” and include the goals (and their related methods) that make you smile.

 

Do a reality check.

 

Review your goal list one more time to weed out the “wishes” and their subsequent feelings of failure and disappointment. What do you WANT to do by 3/31/12? Why? What is realistic and attainable? Fine tune your goals and put them in order of priority accordingly.

 

Get it on the calendar:

 

Turn this list of goals into a PLAN. Chunk it all down into small pieces. One-by-one, determine who will do what and by when. (Remember that it doesn’t have to be you. Continually ask yourself, “Who can help me get this done?” “What other resources or options do I have?”)

 

And….Action!

 

Full ownership, willingness to do whatever it takes and adaptability are key to achieving your goals. Your success depends upon you – take full responsibility to take action, call in resources (including God or your higher power) and be willing to do what is before you, and then make adjustments as you gather data and learn from your experiences.

 

A strategic plan is a living document, made of organic matter (you, your vision and your goals) that is sustained through doing this process again and again throughout the year (quarterly is ideal, though I recommend tracking progress – as measured by numbers – at least monthly.)

 

Now you’re ready to rock! It’s a little scary to have a clear and actionable path…but it’s exhilarating too. Especially with a strategic plan that’s customized for your business and life. 

 

 

 

Ginny Victory is a CPA and a certified coach, who works with entrepreneurs to help them navigate their vision of success to victory. Get free articles and tips at www.victorybeginswithin.com 
 

PROGRAM OBJECTIVES

With funding from state and federal grants, Michigan Saves is designing the Commercial Energy Loan Program to provide a portfolio of affordable financing options for energy efficiency improvements in commercial buildings in Michigan. The objective is to create a statewide program that issues 250 loans annually by 2013 and thereafter.

 

TARGET MARKET

The target market is businesses with high efficiency potential and little-to-no participation in traditional energy efficiency programs. Initially, the program will be available only to the retail food sector, including grocery and convenience stores and restaurants, with an emphasis on small, independent businesses. These businesses are typically energy intensive because of long hours of operation and extensive use of cooking equipment, refrigeration, lighting, and heating and cooling. In the city of Detroit, businesses outside the retail good sector would also be eligible.

 

In addition to a pilot program for businesses in the city of Detroit currently in operation specific geographic locations may be identified for pilot programs in early 2012. Market research on the retail food sector will be conducted during the design phase to inform program design and marketing for a statewide rollout in 2012.

 

ELIGIBLE IMPROVEMENTS

Projects must achieve a minimum of 20 percent energy savings using a whole-building approach or per energy conservation measure implemented (i.e., boiler, pumps, lighting, refrigeration) as described further below. Businesses can follow one of two options to qualify energy-saving improvements for financing:

 

Whole-Building Option

• This option will provide financing for work recommended in an energy audit conducted by certified auditor that reduces the total energy consumption of the building by a minimum of 20 percent.
• Energy audits must follow Technical Energy Analysis Standards, as specified by the Rebuild Michigan program or American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Preliminary Energy Use Analysis (Level I) or equivalent (a more extensive audit, such as ASHRAE Level II or III, also qualifies but is not required when an energy audit is performed).
• Renewable energy installations, including geothermal, solar thermal, and solar PV, qualify for financing only if the overall project reaches a 20 percent energy savings threshold for the entire building. In other words, the renewable energy is packaged with energy efficiency improvements that reduce the building’s total energy (natural gas and electricity) consumption by 20 percent.

 

À la Carte Option

• This option will provide financing for a measure or combination of measures that achieve at least 20 percent savings over existing equipment or conditions and also meet one or more of the following (Note, typical measures for the retail food sector that have been pre-screened as eligible will be available):

1. Qualify for utility (prescriptive or custom) rebate (can include DTE Energy and/or Detroit Public Lighting Department rebates);
2. Are included in the Michigan Energy Measures Database    maintained by the Michigan Public Service Commission; and/or
3. Are recommended in an energy audit by a certified auditor

• Up to 5 percent of the total financed amount can be for non-energy–saving building upgrades if necessary to complete the energy-saving improvements.

 

FINANCING DETAILS

Interest rates are expected to be below 5 percent. Financing terms will be structured in most cases so that the expected energy savings are at least as much as the loan payment after utility rebates are deducted. To further mitigate risk, Michigan Saves has $5 million available to provide as credit enhancement, which is expected to be in the form of loan loss reserve. Additional funds may be available to buy down the interest rate or providedown-payment assistance for businesses participating under the “whole-building” track. Michigan Saves is expecting that the loan capital and underwriting would be provided by one or more participating lenders, although alternative models are also being explored, including the use of bond financing and investor capital.

 

PROCESS

The Michigan Saves Commercial Loan program will be marketed primarily through contractors and trade allies. Secondary marketing outlets would include trade associations, utilities, financial institutions, and economic development entities. The program will be designed to integrate directly with utility rebate programs.

 

The following describes a general process for initiating projects under the Michigan Saves à la carte (non-audit) or whole-building tracks. This process will be refined based on types of financial products offered, anticipated time requirements to initiate a commercial loan, and commercial sectors participating in the program.

• Business customers will work with a Michigan Saves authorized contractor to scope out the proposed project according to eligibility criteria set by Michigan Saves. The business will either be approached directly by a Michigan Saves contractor, or the business will find an authorized contractor from a list maintained by Michigan Saves after learning about the program from another source, such as Michigan Saves website, utility, business association, etc. The project will be based on list of eligible measures or the audit of the facility. Michigan Saves will provide customer support to review the project, including its payback and alignment with incentive programs, such as utility rebates and tax credits.
• Once the project has been reviewed by Michigan Saves, the customer will be put in contact with participating financial institutions. The customer and the financial institution will work together to complete the loan application and finalize the loan. If it is not already provided as part of the energy audit, Michigan Saves will provide the customer and financial institution with a schedule of estimated energy savings for theproject to be used as information to structure the monthly loan payments.
• Upon loan approval, the customer can authorize implementation of the energy measures. Once the installation is complete, the contractor will complete a Certificate of Completion and Specification Sheet, which will be provided to Michigan Saves and the financial institution. Loan proceeds can be assigned to the contractor with approval by the financial institution.

 

QUALITY ASSURANCE/QUALITY CONTROL

The primary marketing vehicle and initial point of contact for the customer will be a network of contractors and other energy professionals authorized by Michigan Saves. To participate in Michigan Saves, contractors must provide evidence of business licenses, insurance, and any required certifications and be trained on the financial product and process. In addition, contractors and auditors conducting energy audits and performing work under the audit option are required to have third-party certification specific to their trade such as an architect or engineer license.

 

Contractors promoting Michigan Saves financing must provide high-quality work. Oversight of contractors will include file checks, as well as random field inspections of a percentage of jobs. This quality assurance role will be performed by Michigan Saves (or its designee). Michigan Saves will coordinate with utility programs to align the quality assurance activities.

 

In addition, Michigan Saves must report on the impacts of the program, including data on equipment installed and the associated energy savings. Michigan Saves will collect baseline energy data, estimated energy savings, and installation specifications at the time the project is installed. Michigan Saves will collect utility data on a yearly basis. Where possible, Michigan Saves will also collect sub-meter-level utility data.

 

SURVEY

Michigan Saves, a non-profit organization, has money to help independent grocers, restaurants, and convenience stores finance equipment that would reduce their utility bills. Michigan Saves would like your opinions to help design an energy financing program in which your business would want to take part. Even if you don’t plan to make improvements in the near future, we value your opinion and appreciate your response.

To thank you for your time, upon completion of the survey we will contribute $10 to your trade association for each of the first 50 people who respond.

Please answer the following questions to the best of your ability. Click here to begin the survey.

By Adam Kaplan
Big Tent Jobs, LLC

 

Consistent with more upbeat economic data in Q4 2011 nationwide, Michigan residents roundly welcomed holiday news in December that Michigan’s unemployment rate has dropped to under 10 percent, its lowest rate since October 2008. They may have more good news in 2012, as economists predict additional job growth when the Michigan Business Tax will be replaced with a corporate tax, resulting in a billion dollars that business owners can use instead to invest in growth and expansion.

 

As forecasters see the state adding 70,000 jobs by the end of 2013, in professional and business services, as well as in manufacturing, it behooves companies orbiting in a competitive global economy to cultivate a 21st century workforce that feeds the bottom line, is socially savvy, and which advances its values agenda. To do this, one must tap into a hidden talent pool: college-educated people with disabilities.

 

The Federal Government is putting the pressure on for companies to act. The Department of Labor has proposed a new role that would require all federal contractors, including those in Michigan, to set a hiring goal of 7 percent when it comes to workers with disabilities. This target is good for people with disabilities — and for the companies who hire them. Studies show that more than 90 percent of consumers feel favorable toward companies that hire people with disabilities; 87 percent of them would prefer to purchase from such companies.

 

Employees with disabilities on average also have superior attendance records than their able-bodied peers do, and employees with disabilities average one-sixth the recorded occupational health incidents of employees without a disability.

 

Employees with disabilities, like able-bodied job seekers, mostly want to be cultivated and mentored throughout their employment, and to be rewarded for a job well done. However, they also bring a unique ability to be flexible and to innovate, as they have adjusted to the changes and challenges forced upon them by their disability.

 

Some disabilities are seen outright, as when a person must use a wheelchair or crutches for mobility. Other disabilities such as cancer, multiple sclerosis, or depression, may be hidden. It is only when supervisors and hiring managers create opportunities and an environment in which these, and all employees, are able to bring their whole selves to work, will these workers give 100 percent and more to their jobs, resulting in increased creativity and productivity.

 

With wounded veterans returning from the now-ended war in Iraq, companies increasingly have a unique opportunity to add disabled workers to their ranks. For IT, engineering and software firms, this means accessing highly-skilled, technologically astute candidates in unprecedented numbers.

 

Here again the government in Washington has acted; to give employers a greater incentive to hire veterans, President Obama has signed a bill that includes tax breaks for businesses that hire veterans: up to $5,600 for each veteran and up to $9,600 for each disabled veteran. 

 

The corporate sector has taken action on the Veteran cause as well. JP Morgan Chase, along with Delta Airlines, Cisco, AT&T and a dozen other companies have spearheaded an initiative to employ service members, including those with disabilities, through the creation of 100,000 Jobs Mission, which aims to hire 100,000 transitioning veterans by 2020. Positions range from entry-level to managerial. Nearly 3,000 veterans have been placed in jobs so far.

 

While the reported unemployment rate for people with disabilities is roughly double the national average, when including people who have given up looking for work, that number rises to a staggering 70 percent.  Not only is this an injustice which flies against the spirit of America, but it deprives companies of the talent that they need to succeed in the global economy. Michigan business leaders would be wise to focus more of their recruiting efforts on this talent pool before their competitors do.

 

Adam Kaplan is the Founder and CEO of Big Tent Jobs, LLC, a recruitment agency which places professionals with disabilities at leading companies.  For more information, visit bigtentjobs.com or call 248-281-1386.